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Mid-Atlantic Corporate updates stabilization impact

MIDDLETOWN, Pa. (5/19/09)--Mid-Atlantic Corporate FCU issued a corporate stabilization update Thursday after U.S. Central released its results Wednesday of its first-quarter financials. The update states that Mid-Atlantic will see its Membership Capital Shares (MCS) at U.S. Central deplete by 23% of their value instead of the 63% previously estimated. U.S. Central’s previous estimates were released May 1 (FOCUS Newsletter May 18). U.S. Central will still exhaust 100% of Paid-in Capital (PIC) versions I and II, along with the depletion of 23% of MCS as of March 31 for all corporates. Previously, Mid-Atlantic had $49.5 million in PIC and $95 million in MCS at U.S. Central. The corporate will apply its retained earnings of roughly $98 million to the loss, leaving about $26.5 million in retained earnings. “Although these reported numbers may indicate that our members’ Membership Capital Accounts (MCA) could be untouched, if our certified public accounting (CPA) firm determines that the potential for additional losses to MCS is likely, it could still have us take the worst-case scenario and write-down all of our MCS with U.S. Central. In this scenario, Mid-Atlantic Corporate’s members holding MCA will, in turn, be forced to take a 23% loss on their MCA with us,” the corporate said. As for the corporate’s capital, the release said: “Current regulatory requirements for capital are set at 4% minimum regulatory reserves and 2% minimum tier 1 generally accepted accounting principles (GAAP)-qualified reserves. While retained earnings and PIC qualify as both regulatory and tier 1 GAAP capital, MCS only qualifies as regulatory capital. “Prior to the conservatorship of U.S. Central and the extinguishment of Mid-Atlantic’s capital held at U.S. Central, Mid-Atlantic had 9.6% regulatory capital and 2.9% tier 1 GAAP capital; both exceed the regulatory requirements,” the release continued. “Following the U.S. Central conservatorship and exhaustion of Mid-Atlantic’s capital, its total regulatory capital level remains above the 4% minimum at 6.8%, but the tier 1 GAAP capital level has fallen below the regulatory requirement to 0.8%.” Mid-Atlantic encouraged its member credit unions to consult with their CPA firms to determine how to reflect these transactions on their income statements and balance sheets. Mid-Atlantic Corporate FCU is based in Middletown, Pa. U.S. Central is based in Lenexa, Kan. For more information, use the link.